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US DOLLAR TALKING POINTS:

- US Dollar Price Action Setups: EUR/USD, USD/JPY and USD/CHF.

- US Dollar Weekly Price Outlook: DXY Rally at Risk into Yearly Highs.

- US Dollar Holds Ground as NFP Prints 196k for March US Jobs Report.

Retail Bets Against a USD Breakout via EUR/USD, GBP/USD

Retail traders appear to be looking for USD-weakness to show in Q2, as IG Client Sentiment is currently showing heavy long positioning in both EUR/USD and GBP/USD. Retail sentiment is traditionally a contrarian type of indicator, and this can keep focus on the bullish backdrop around the US Dollar as the quarter’s first major rate decision is on the economic calendar for next week with Thursday’s ECB meeting.

Do you want to see how retail traders are currently positioned around the US Dollar? Check out our IG Client Sentiment Indicator.

This was the driver last month that really seemed to prod USD-bulls, creating a swell of strength until the US Dollar tested the yearly-high at 97.71. But, that resistance came into play just hours after the ECB announcement; and the following morning brought an abysmal NFP report that saw that theme of USD-strength further reverse – and that remained into the FOMC rate decision on March 20th. The Fed went dovish by cutting forecasts for rate hikes in 2019, and that brought a quick continuation of weakness in the Greenback as prices pushed down to trend-line support. But – buyers were able to hold the lows, and in the two-and-a-half weeks since, have largely remained in-control of USD price action.

US Dollar Four-Hour Price Chart

USD

Chart prepared by James Stanley

As discussed in the Q2 technical forecast on the US Dollar, the currency has built into an ascending triangle formation, and this will often be approached in a bullish manner. The expectation is that the motivation that’s continued to bring in bulls at higher-lows, similar to what was seen in the aftermath of the March FOMC rate decision, will continue until resistance is eventually taken-out. This is one of the primary reasons for the bullish forecast on the US Dollar for Q2, and this potential remains until that formation is invalidated, which would take place upon a drop below March support around 95.74.

Access the DailyFX Q2 Forecasts for USD, Euro, GBP and More

US Dollar Daily Price Chart

USD

Chart prepared by James Stanley

US Dollar Forecast for Next Week: Neutral

While longer-term bullish potential remains around the US Dollar, this may not be the most opportune time to try to anticipate that breakout. At this point, given the rigidity of that resistance, USD is likely going to need some type of catalyst to create enough motivation for buyers to finally break through to the other side. Perhaps ECB is that catalyst; but given that the bank already triggered a fresh round of stimulus while cutting both growth and inflation forecasts, there may not be much more that they can do to create a bearish push in EURUSD, which could then create bullish breakout potential in the US Dollar. Or maybe it ends up being fears of a No-Deal Brexit that creates that swell of strength in the US Dollar as Cable traders punish GBP for another increase in uncertainty.

Whatever the root cause: Bullish breakouts above 97.71 in DXY can re-open the door for topside strategies in the US currency. But, until then, traders should remain on guard.

US Dollar Four-Hour Price Chart

USD

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q1 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

Other Weekly Technical Forecast:

Australian Dollar Forecast - AUD/USD Outlook Mixed, AUD/NZD and GBP/AUD Flirt with New Trends

Oil Forecast - Crude Oil Prices Hit Fresh 5-Month High with Eyes Glued on Dow and Risk

British Pound Forecast - GBPUSD & EURGBP Trends Creaking